India’s services sector growth climbs to near 13-year high in April: PMI

India witnessed an acceleration in growth in its services sector in April as strong demand conditions resulted in the fastest increase in new business and output in close to 13 years, a monthly survey said on Wednesday (May 3).

The pick-up in demand occurred in spite of escalating price pressures.

Also read: India’s services sector growth eases slightly in Jan

According to the report, the seasonally adjusted S&P Global India Services PMI Business Activity Index rose from 57.8 in March to 62.0 in April, signalling the fastest expansion in output since mid-2010, amid a pick-up in new business growth and favourable market conditions.

The headline figure was above the neutral 50 threshold for the 21st straight month. In Purchasing Managers Index (PMI) parlance, a print above 50 means expansion while a score below 50 denotes contraction.

“India’s service sector posted a remarkable performance in April, with demand strength backing the strongest increases in new business and output in just under 13 years. Finance and insurance was the brightest spot, topping the sectoral growth rankings for both measures,” said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.

Monitored companies signalled an improvement in international demand for Indian services in April. New export business expanded for the third month in succession and at the fastest pace over this period.

On the prices front, input costs rose at the quickest pace in three months during April.
According to survey members, food, fuel, medicine, transportation and wages were the main sources of inflation. Consumer services recorded the fastest upturn in average expenses.

A combo of rising input costs and demand resilience urged services companies to lift their selling prices in April. The rate of charge inflation was marked and the strongest in 2023 so far.

Also read: Inflation, slow business push service sector PMI to six-month low

On the jobs front, despite the substantial uptick in new orders, staff levels in the service sector increased only marginally at the start of the first fiscal quarter, the report said. Companies lifted headcounts due to rising output needs, and the vast majority left them unchanged amid sufficient workers for current requirements.

“One area of weakness highlighted in the latest results was the labour market. Despite the substantial pick up in sales growth and improved business sentiment towards the outlook, the increase in employment seen in April was negligible and failed to gain meaningful traction,” Lima said.

Going ahead, marketing efforts, plans to price competitively and an increased focus on customer relations boosted business confidence in April.

“Close to 22 per cent of companies forecast growth of business activity over the course of the coming 12 months, compared with 2 per cent that anticipate a reduction,” the survey said.

Meanwhile, the S&P Global India Composite PMI Output Index – which measures combined services and manufacturing output – rose from 58.4 in March to 61.6 in April, its highest mark since July 2010.

Also read: India’s services sector records second fastest growth pace since 2011

Job creation across the private sector, however, remained mild despite the substantial rise in sales. Rates of expansion were broadly similar at manufacturing firms and their services counterparts.

At the composite level, input costs rose at the fastest pace since January and charge inflation reached a four-month high.

The S&P Global India Services PMI is compiled by S&P Global from responses to questionnaires sent to a panel of around 400 service sector companies. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP. Data collection began in December 2005.

(With inputs from agencies)